Compound Interest

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This week Doug Andrew discussed the following:

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All attendees receive a bonus hardcover copy of Last Chance Millionaire, Doug Andrew’s New York Times best-selling book.

Change Can Be a Reason To Cheer

We each have a choice regarding whether or not this is the year we’ll do things differently.

This is particularly true with respect to our financial futures.

It’s a perfect time for more of us to start taking ownership of our future instead of making Social Security the basis of our future retirement or waiting for government to take care of us.

Even among those who’ve been saving for retirement, too many people have simply kept following the crowd hoping to regain what market losses have cost them.

A perfect example of this is those who keep putting their money at risk in the market and “hang in there” waiting to realize the average 12% returns they were promised.

They don’t understand that if, over a decade, their return goes up 10% for half of those years and goes down 10% for the other half, they won’t break even.  Instead they’ll end up with only 95% of the amount they started with.  No one can afford to lose money on a regular basis.

This common error is compounded when many of these same people continue to sock money away in tax-deferred savings vehicles thinking they’ll be in a lower tax bracket when they retire.  But with taxes on the rise combined with the loss of critical deductions, they may well end up paying higher taxes even though their income is less.

If your answer is to keep doing what you’ve always done, you can expect to keep getting what you’ve always gotten.

If those folks had used the Missed Fortune indexing strategies instead, they could see their money safely grow as the market goes up, but enjoy safety of principal and not lose a dime when the market declines.  Over the past decade, these indexing strategies have enabled many people to earn 7.23% actual return—and that’s tax-free!

This may be the time to make a resolution to start rerouting some of the money you’ve been sinking into 401(k)s or IRAs and start taking distributions before the Bush tax cuts expire at the end of next year.  This is known as a strategic rollout and it will make a world of difference when we see taxes go up again.

If you do want to learn how to do things differently, now is the time to empower yourself.  Thousands of people have found a better way to take ownership of their future through learning and implementing the Missed Fortune strategies.

With these strategies, you’ll clearly understand the three key elements of a good investment:

1. Liquidity- The ability to get to your money when you need it.
2. Safety- The practice of protecting your principal by making turning the money you make in any given year into newly protected principal.
3. Rate of Return- This means that you are earning a predictable, tax-free rate of return that allows you to outpace inflation.

An investment that has all 3 of these qualities is far more likely to prove a good investment.

This is the kind of knowledge that promotes confidence and certainty at a time when so many are struggling with confusion and a sense of isolation.

Three Marvels of Wealth Accumulation

Motivational superstar Zig Ziegler loved to quiz his audience about the difference between a $10,000 racehorse and a $1 million racehorse.  He’d ask them if the million dollar racehorse was worth 100 times more than the other one because it was 100 times faster than the $10,000 one.

After careful consideration, the answer was usually “no.”

Ziegler would point out that sometimes the only measurable difference between these two horses often came down to a few thousandths of a second out there on the racetrack.

His point was that the horses actually started out on a more level playing field than most people might suspect.  What made the real difference was the way they were trained and how they applied their training.

When it comes to those who accumulate great wealth, the same principle applies.  Many of the world’s wealthiest individuals didn’t merely inherit their wealth; they earned it.

More importantly, they earned that wealth because they learned to recognize opportunities that others around them did not.  They didn’t possess superhuman capabilities or powers of discernment; they simply learned the principles of wealth accumulation and applied them.

These principles are not widely practiced, but they’re not secret, nor are they shrouded in mystery.   The reason everyone isn’t practicing these principles of wealth accumulation is that they are simply not widely understood.  They will work for anyone who is willing to learn them and apply them.

To better illustrate the kind of principles we’re dealing with, let’s look at three of the main ones relating to the accumulation of wealth.

The three marvels of wealth accumulation are:

Compound Interest.  Einstein called it the most misunderstood phenomenon on the planet.  One way to visualize how compound interest works is to imagine that you could fold over a piece of copy paper 50 times so that it doubled in thickness each time.  By the 50^th time that paper had been doubled, it would be over 93 million miles in thickness.

Money can likewise accumulate at an astounding rate thanks to compound interest, but this is only true when that money is able to grow tax-free.  Tax-advantaged vehicles are grandfathered into the IRS code, but they must be set up correctly.

Tax-Free Accumulation.  The second marvel of wealth accumulation is one of the most important especially when considering the likelihood of taxes going up in the future.  Taxes can quickly deplete even a sizeable nest egg within a matter of just a few years.  Outliving your retirement money is a definite possibility.

Consider that your million dollar tax-deferred nest egg will only be worth around $666,000 after Uncle Sam claims his share.  Get those taxes out of the way up front and your money will grow, distribute and eventually transfer tax-free to your spouse or children.  There are specific sections of the IRS code that make this possible.

It’s in your interest to learn what they are and how to apply them.

Safe Positive Leverage.  This describes the ability to own and control assets with very little or none of your money actually tied up or at risk of being lost in the asset.

If you’re borrowing money at 4% and are able to leverage that money where you’re earning an 8% rate of return, you’re now getting infinite return.  The main reason most people don’t avail themselves of safe positive leverage is that they don’t know what they don’t know.

These three marvels are just a few of the principles that can make all the difference for those who wish to accumulate wealth in any economy; including our current struggling one.

Learn how to make these principles work for you by contacting a Missed Fortune advisor today.

Bonus Missed Fortune E-Book: Baby Boomer Blunders The average Baby Boomer has less than $50,000 accumulated for retirement (which means many have less than that), primarily due to bad habits and having money invested in the wrong places where economic downturns can diminish their nest egg. Download this e-book now at www.babyboomerblunders.com.

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